Sir, – The views of Prof Brian Kelly (“Irish banks are fully justified in keeping deposit rates low”, Opinion, Business, August 28th) reflect a particular approach to public policy and democracy. The suggestion that the two “significant” banks directly supervised by the ECB, and the “less significant” institutions supervised by the Central Bank of Ireland, should be immune from public policy measures and taxation on profits is fascinating.
Citing a report from Banking and Payments Federation (a lobby group for financial institutions and vulture funds), he suggests that Irish mortgage lenders face risks at almost three times the euro-area average. The reason given is that lenders in Ireland cannot efficiently and predictably enforce mortgage security on primary dwelling homes, citing part of a somewhat contradictory IMF 2022 report on Irish insolvency and creditor rights, without any reference to consumer rights.
This particular canard is becoming somewhat jaded in the context that two-thirds of Irish long-term mortgage arrears (LTMA) are now held by vulture funds and non-banks, and current Irish bank mortgage rates are very close to the euro-area average. The Irish authorities suggested to the IMF that relatively higher operating costs and levels of competition in Ireland were important factors. While the IMF report ignored the Central Bank mortgage lending rules from 2015 curbing reckless lending, it did accept that Irish LTMAs are largely a legacy of reckless lending and the 2008 crisis, and that the primary issue is that most LTMA debtors are simply unable to afford their mortgage. Central Bank of Ireland research in 2021 showed that more than 40 per cent of LTMA debtors cannot afford to pay even 50 per cent of their mortgage by retirement age, and almost 20 per cent cannot afford to pay anything at all.
The IMF report suggested that creditors should realise their losses and “internalize the costs of over-lax lending”, and that debtors should be relieved from the burden of their unsustainable debt. It suggested that the financial sector by itself is an inefficient and distortionary tool to address LTMAs. Insolvency and creditors rights regimes must be accompanied by effective social housing policy and social housing, according to the IMF.
The Washington-based IMF report correctly referred to legislation in 2019 requiring courts to take account of the circumstances of the debtor and their dependents, including any offer made by the debtor to resolve the situation. This also requires courts to consider whether ordering an eviction would be “proportionate” in all the circumstances. It balances the power of corporate lenders with the human needs of distressed borrowers – and in some cases these households include a person with disabilities, children or older people.
Significantly, in the context of the debate on citizens’ rights to housing rights in Ireland, the IMF report suggests that a more efficient enforcement regime is crucial to an effective “creditors’ rights” system. A surprisingly intrusive recommendation suggests eliminating Circuit Court adjournments which allow a debtor to engage with a personal insolvency practitioner, established in Irish legislation from 2013.
The eviction of mortgage debtors and their dependents or children from their homes by lenders is mediated in Ireland through carefully drafted legislation, the Code of Conduct on Mortgage Arrears, personal insolvency arrangements and court procedures and precedents. Indeed, the humanity of Irish registrars and judges, and the pro bono work of many solicitors and barristers, have mitigated the worst excesses of corporate lender actions since the financial crash, where debtors can access these and recognising that two-thirds of home repossessions have taken place through voluntary “surrenders”. The protection available to people with LTMAs in Ireland will soon be tested with the introduction of the EU credit servicers directive, which facilitates cross-border sales of “non-performing loans” and “credit servicing” being “passported” from any EU member state. – Yours, etc,
Prof PADRAIC KENNA,
School of Law,
University of Galway.